Tax Type
Local Taxes
Property Tax
Retail Sales and Use Tax
Description
Radio station purchase leaseback transaction
Topic
Local Taxes Discussion
Date Issued
02-09-1984
- February 9, 1984
Re: Request for Ruling/Sales and Use Tax and Property Tax
Dear ************************
This will reply to your correspondence of October 26, 1983 in which you submit a request for rulings on the application of the sales and use tax and local property taxes to two specific lease transactions.
FACTS
************************* (hereinafter *****) is engaged in the leasing of broadcasting equipment and requests a ruling as to the correct application of the sales and use tax and local property taxes to transactions involving two Virginia radio stations. The first transaction involves the leasing of various items to a radio station while the second transaction involves the purchase from and subsequent leaseback of various items to a radio station.
RULING
I shall first address the application of the sales and use tax to ***** Virginia lease transactions. § 58-441.6(j) provides an exemption from the sales and use tax for "[b]roadcasting equipment and parts and accessories thereto and towers used or to be used by commercial radio and television companies." The Virginia Supreme Court has held, in WTAR Radio-TV Corporation v. Commonwealth, 217 Va. 877, 234 S.E. 2d 245 (1977), that "the broadcasting exemption applies only to broadcasting equipment and accessories thereto used directly in the act of disseminating a signal into the air, not to the equipment and accessories used to create the material which may be disseminated."
Based upon the foregoing, tangible personal property deemed to be exempt under the above statute includes antennas, towers, transmitters, and audio and control equipment used for live transmissions. However, I am unable to rule on the status of much of the equipment listed in your ruling request inasmuch as we do not know in what manner and for what purposes such equipment will be used. If an item-by-item ruling is desired, please set forth a description of each item's use in broadcasting activities. We will particularly need to know whether such equipment is used in programming or transmitting activities.
Should any of the items leased by **** to Virginia customers be deemed subject to the sales tax, Virginia Code § 58-441.4 provides that the tax be computed upon the "gross proceeds" from the lease or rental. Virginia Code §§ 58-441.3(f) and (b) define the term "gross proceeds" as the "charges made or voluntary contributions received for the lease or rental of tangible personal property or for furnishing services." Thus, the tax must be computed based upon the total amount of payments received for the rental or lease of nonexempt broadcasting equipment without any deduction therefrom except for the deductions specifically set forth in Virginia Code § 58-441.3(b). Those deductions include "cash discounts allowed and taken on sales...the amount separately charged for labor or services rendered in install-ing...or repairing property sold...carrying charges...or transportation charges separately stated.
Accordingly, installation charges, and transportation charges from **** to its customers are exempt from the tax when separately stated on the customer's invoice; however, insurance charges included in the lease price of equipment are subject to the tax.
With respect to the sales and use tax treatment of "safe harbor leases," Virginia Code § 58-441.6(n) provides an exemption from the tax for the purchase of "tangible personal property for future use by a person for taxable lease or rental...including a simultaneous sale and lease-back." To determine the correct treatment of **** safe harbor transaction though, it will be necessary to furnish a copy of the sale and leaseback agreement with *****. Also, it would be helpful if you would identify any of the items involved in this transaction which become affixed to realty and take on the character of real property.
For the purposes of local property taxation, the machinery and tools of a radio station are deemed to be tangible personal property subject to tax in the locality in which such items are located. Additionally, items which become affixed to realty are subject to local real estate taxes. Generally, items classified as machinery and tools would include monitoring and control equipment, radio and testing equipment, synchro generating equipment, transmitters, etc. Real property items would include towers and antenna. For a more comprehensive review of ***** local property tax obligations, you should contact the Director of Finance of the **** of ****** at *****, and the Commissioner of the Revenue of the City of ***** at ***** the City Hall,
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner